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Economic Environment of Business

Liberal Investment Measures and Industrial


Development in India
Submitted to
Prof. S. P. Das

Siddhi Prasad Lenka


UM14110 /Section B

Introduction
Indian economic policy after independence was influenced by the
colonial experience (which was seen by Indian leaders as exploitative
in nature) and by those leaders' exposure to Fabian socialism. Policy
tended towards protectionism, with a strong emphasis on import
substitution,
industrialisation
under
state
monitoring,
state
intervention at the micro level in all businesses especially in labour and
financial markets, a large public sector, business regulation, and
central planning. Five-Year Plans of India resembled central planning in
the
Soviet
Union.
Steel,
mining,
machine
tools,
water,
telecommunications, insurance, and electrical plants, among other
industries, were effectively nationalised in the mid-1950s. Elaborate
licences, regulations and the accompanying red tape, commonly
referred to as Licence Raj, were required to set up business in India
between 1947 and 1990.
This development of the License Raj, stifled the initiative and
enterprise in the private sector, but at the same time they got
protection from foreign competition by means of import restriction and
high tariffs. By the absence of competition, the industries developed
with lack of cost and quality consciousness. At the same time the
public sector was growing and the share of public sector in the GDP
increased from about 10 percent in 1960-61 to 27 percent in 1988-89.
The main concern was that a majority of the PSEs were making losses
and had to be subsidized year after year.

Attempts were made to liberalise the economy in 1966 and 1985. The
first attempt was reversed in 1967. Thereafter, a stronger version of
socialism was adopted. The second major attempt was in 1985 by
prime minister Rajiv Gandhi. The process came to a halt in 1987,
though 1967 style reversal did not take place.
In the 80s, the government led by Rajiv Gandhi started light reforms.
The government slightly reduced Licence Raj and also promoted the
growth of the telecommunications and software industries.
The Vishwanath Pratap Singh (19891990) and Chandra Shekhar Singh
government (19901991) did not add any significant reforms.
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The low annual growth rate of the economy of India before 1980,
which stagnated around 3.5% from 1950s to 1980s, while per
capita income averaged 1.3%. At the same time, Pakistan grew
by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10%
and Taiwan by 12%.
Only four or five licences would be given for steel, electrical
power and communications. Licence owners built up huge
powerful empires.
A huge private sector emerged. State-owned enterprises made
large losses.
Income Tax Department and Customs Department became
efficient in checking tax evasion.
Infrastructure investment was poor because of the public sector
monopoly.
Licence Raj established the "irresponsible, self-perpetuating
bureaucracy that still exists throughout much of the country" and
corruption flourished under this system.

Indias fragile economy was plunged into a deep crisis-a crisis of macro
economic imbalances at the entry of the 1990s. The main factors
contributing to the crisis were:
- the Gulf war was leading to a sharp increase in the oil prices,
- decline in foreign exchange reserves since September 1990
leading to recourse to IMF borrowing,
- payment crisis leading to loss of confidence on the
Governments ability to manage economic environment,
drying up to short term credit, decline in Indias credit rating,
net outflow of NRI deposits; and
- above all, fiscal crisis-rising revenue and fiscal deficits leading
to fiscal imbalances and rising prices.
Then in July 1991 series of new policy measures known as Economic
Reforms was announced with a view to restoring confidence was
announced. These measures came in a package containing seven
reforms: (1) Fiscal Policy reforms, (2) Trade Policy Reforms (3) Industry
Policy Reforms (4) Financial Policy Reforms (5) Agricultural Policy
Reforms, (6) Poverty Alleviation Policy Reforms, and (7) Human
Resource Policy reforms. These reform measures are known as
stabilization and structural adjustment programme which started a
process of Liberalization and Fiscal Correction.
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The Path to Liberalization


The path to liberalization accepted to dismantle the walls of
restrictions in India which has been multi-pronged. First of all the
Government had to release the economy from the restrictive rules and
regulations framed by the bureaucratic and socialistic pattern of
society. Then India needed to establish the image of a market-oriented
economy in the eyes of foreign governments, besides sustaining a
private sector friendly image within the country. On the other hand, the
Government of India needed to be successful in effectively checking
the twin problems of unemployment and inflation. The task before the
Government was to win the confidence of the foreign investor and allay
the fears of the Indian Public about the entry of the foreign investors
into India and the Governments capability to check the problems of
inflation and unemployment.
Relief to Foreign Investors
The Indian Government wanted to attract the more foreign
investments, hence in place of majority of Indian equity holdings,
foreign investments were allowed to the tune of 51 percent, in July
1992. Companies were allowed to expand the equity base of the
existing company by raising the foreign equity upto 51% without an
expansion programme. The Government also proposed to consider the
foreign equity participation beyond 51 percent in high priority areas.
This policy of foreign investment paid off tremendously. During August
1991 to December 1992, foreign investment to the tune of Rs. 42.9
billion was approved. More than 80 percent of the investments were in
the priority sector.
Another important source of foreign investment was the remittance
from Non-Resident Indians especially from the Gulf.
Devaluation of Indian Rupee and Full Convertibility
In order to pave the way for liberalization, Indian currency was
devalued by 22.5 percent in two stages in short intervals. It was
expected to improve exports substantially while curtailing imports.
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New Industrial Policy


As a part of liberalization, a new industrial Policy was announced by
the Government of India in two parts, on July 24, 1991 and 6 th August
1991 respectively.
New Trade Policy
Government of India enunciated the new trade policy in support of its
liberalization policy in 1991. The trade regime was liberalized by
streamlining and strengthening advance licensing system and
decanalising 16 export and 20 import items.

Removal of Import Restrictions


While encouraging exports, the GOI made efforts to facilitate and
streamline imports too. Import restrictions were partially withdrawn in
India in accordance with the global trends in the new Trade Policy of
July 1991. The Government further decided in January 1992 to do away
with licensing on import of capital goods under the scheme of direct
foreign investment upto 51 percent of foreign equity in high priority
areas. On the eve of the Geneva round of GATT, 16 th Dec, 1993, the
Government reduced the import duties of 17 textile products from 85
percent to 40 percent. This was a token of its intention to liberalize
consumer goods also.
Budgetary Policy
In the Central Budget of 1991-1992, a spending discipline was
introduced import duties reduced and measures were adopted to
initiate structural changes. Licensing was scrapped in the industrial
policy of 1991-92 budget. MRTP and FERA liberalizations were also
initiated. Gold bonds were floated and NRIs and expatriates were
allowed to import 5 kgs of gold. The Government control on capital
issues was abolished and a flat rate of 40 percent was fixed on firms.

NRI Remittances
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NRI foreign exchange bank accounts, convertibility of foreign exchange


in market rates, foreign exchange gift schemes, gold import policy, etc.
facilitated the inflow of foreign exchange through NRIs. NRIs and OCBs
were allowed to invest upto 100 percent foreign equity in high priority
industries including hotels, tourism-related industry, shipping,
hospitals, etc.
Governments NRI investment policy paid off considerable dividends
since NRI and OCB investment went up unprecedented, thus speeding
up the pace of globalization
.
Encouraging Foreign Tie-ups
Foreign technical and financial collaborations were substantially
liberalized by the Government. Single window clearance facility was
introduced through the RBI so that collaboration between Indian
Companies and foreign companies can be facilitated.
.
FERA and MRTP Liberalization
The most important aspect of liberalization of MRTP regulations is the
removal of the threshold limits for assets of MRTP companies and
dominant undertaking. The MRTP Act was amended to totally remove
pre-entry restrictions on establishments of new undertakings and
expansion of the existing firms.
FERA companies were allowed to have foreign equity holdings upto 51
percent in high priority areas FERA companies were allowed greater
freedom to operate in India, since restrictions on internal operations
were removed. They were allowed to acquire property, raise fixed
deposits internally and to have stakes in other companies. This was a
great motivation to foreign corporate giants to freely operate in India
without fear.
Simplification of Industrial Licensing
Various types of industrial approvals were substantially liberalized, and
a notification to this effect was issued by the Department of Industrial
Development under the Industries (Development and Regulation) Act,
1951
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Banking Reforms
In order to facilitate the liberalization and to establish a positive
rapport with World Bank in the context of the grave foreign exchange
crisis, banking and financial sector reforms were also initiated.
Regulations in Indias financial sector and directions to banks for
greater financial discipline were issued. Private Sector banks including
foreign banks were encouraged to operate in India.

Has Liberalization Worked Wonders for India after 1991?


India was a latecomer to economic reforms, embarking on the process
in earnest only in 1991, in the wake of an exceptionally severe balance
of payments crisis.
We have seen landmark shift in Indian Economy since the adoption of
new economic policy in 1991. This had far reaching impacts on all
spheres of life in India. There can be no concrete conclusions about
their impact on Indian people. This turns out to be more of an
ideological debate like capitalism vs Socialism. But there is no doubt in
the fact that those reforms were unavoidable and very compelling.
There was in fact, similar wave all across the globe after disintegration
of USSR and end of the Cold War. Many Post-colonial democratic
regimes, which were earlier sheltered by USSR, lost their umbrella.
They had no option, but to fall in line to new unipolar world order
dictated by USA. Even China in late 1980s adopted Open Door Policy
through which it liberalized its economy by shedding communist
mentality completely. South East Asian economies also reformed their
economy and started engaging more with global economy. These along
with China, pursued export led growth whereas Indian economy still
relies almost wholly on domestic consumption.
Undoubtedly strongest revolution of new century has been one of
Information Technology, which started in last years of past century.
This revolution was different because it made globalization even more
obvious and stark. It made possible transfer of real time human labor
across nations, without transfer humans themselves. Further, it erased
all boundaries which hinder free flow of information. This has benefited
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sharing, nurturing and development of knowledge in societies which


earlier had access only to substandard or non-updated information. As
always package is coupled with some grim realities too.
Governments all across the world has lost their capacity to regulate
and ward of against malicious, false, sensitive information and content.
Rise of Islamic State demonstrates that, IT revolution has helped
development of global Terrorist links more than anything. Moreover,
explicit content is freely available on web, to which unmatured children
have unrestricted access

GDP growth rate


Indias annual average growth rate from 1990 2010 has been 6.6 %
which
is
almost double than pre reforms era. GDP growth rate surpassed 5%
mark in early 1980s. This made impact of 1990s reforms on growth
unclear. Some believe that 1980s reforms were precursor to LPG
reforms. Other things apart, it is clear that 1980 reforms led to crash of
economy in 1991, which was remedied by LPG reforms which were
quite more comprehensive. It was IMF loan which gave government to
adjust its economy. It was largest ever loan given by IMF. Initially there
were global doubts on Indias credibility for loan, but India has been so
far a disciplined borrower.

Industrial Growth Rate


Barring few years industrial growth rate has been not much
impressive. Share of Industry still remains stagnantly low at 25%.
Worst is that India has transitioned to be a service led economy,
directly from an agrarian one. One expiation of this is end of policy of
imports substitution which derived industrial growth upto 1990. Foreign
companies got free access to Indian markets and made domestic
products uncompetitive. They obviously had better access to
technology and larger economies of scale.
Indias position also lagged on account of Research and innovation.
Import substitution required certain degree of investment and efforts in
domestic production. It was carried out even when imports were
cheaper. This resulted in good and better capacity building upto that
time. This was coupled with constant technology denial by west, which
further pushed government to spend on R&D. Technology Denial ended
with liberalization and globalization. Till that time Indian Industry was
better and modern than that of China. But in two decades China has
surpassed India by huge margin in case of both Industry and
innovation.
Impact on Small Scale in India
This impact shall be studied right from the beginning of colonization in
18th century. Colonization can be considered as 1st wave of
globalization. In pre colonization era, Indias textiles and handicraft was
renowned worldwide and was backbone of Indian economy. With
coming of industrial revolution along with foreign rule in India, Indian
economy suffered a major setback and much of its indigenous small
scale cottage Industry was destroyed.
After independence, government attempted to revive small scale
sector by reserving items exclusively for it to manufacture. With
liberalization list of reserved items was substantially curtailed and
many new sectors were thrown open to big players.
Small scale industry however exists and still remains backbone of
Indian Economy. It contributes to major portion of exports and private
sector employment. Results are mixed, many erstwhile Small scale
industries got bigger and better. But overall value addition, product
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innovation and technology adoption remains dismal and they exist only
on back of government support. Their products are contested by
cheaper imports from China.
Impact on Agriculture
As already said, share of agriculture in domestic economy has declined
to about 15%. However, people dependent upon agriculture are still
around 55%. Cropping patterns has undergone a huge change, but
impact of liberalization cant be properly assessed. We saw under
series relating to agriculture that there are still all pervasive
government controls and interventions starting from production to
distribution (here SPS and here WTO).
Global agricultural economy is highly distorted. This is mainly because
imbalance in economic and political power in hands of farmers of
developed and developing countries. In developed countries,
commercial and capitalistic agriculture is in place which is owned by
influential Agri corporations. They easily influence policies of WTO and
extract a better deal for themselves at cost of farmers of developing
world.
Farming in developing world is subsistence and supports large number
of poor people. With globalization there has been high fluctuation in
commodity prices which put them in massive risk. This is particularly
true for cash crops like Cotton and Sugarcane. Recent crises in both
crops indicate towards this conclusively.
Also there is global Food vs. Fuel confusion going on. Sugar and corn
are used to manufacture ethanol which is used as fuel. In USA Corn is
produced mainly for this purpose, as sugar cane is in Brazil. Now there
are apprehensions that what if converting food into fuel is more
remunerative for producers? More than 1 billion people still live in
hunger, much more are just hand to mouth. It is futile to expect that
free market will take care of these people, who dont have any
purchasing power. Clearly, Agriculture is biggest market failure, but is
rarely discussed for being so in WTO.
Another global debate born out of globalization is one of GM crops.
Here too powerful MNCs like Monsanto hold the key. USA allows
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unhindered use of GM crops, but EU bans it. In India field trails are
going on. (It was discusses here)
On the positive note, Indias largely self-sufficient and high value
distinguished products like Basmati Rice are in high demand all over.
Generally speaking, India is better placed to take up challenge of
globalization in this case. If done in sustainable and inclusive manner,
it will have a huge multiplier impact on whole economy. Worldwide
implicit compulsion to develop Food processing Industry is another
landmark effect of globalization.
Apart from these, Farm Mechanization i.e. use of electronic/solar
pumps, Tractors, combines etc. all are fruits of globalization. Now
moving a step further, Information technology is being incorporated
into agriculture to facilitate farming.
Impact on Services Sector
In this case globalization has been boon for developing countries and
bane for developed ones. Due to historic economic disparity between
two groups, human resources have been much cheaper in developing
economies. This was further facilitated by IT revolution and this all
culminated in exodus of numerous jobs from developed countries to
developing countries. Here US have to jealously guard its jobs as we
guard our agriculture.
IT industry
Software, BPO, KPO, LPO industry boom in India has helped India to
absorb a big chunk of demographic dividend, which otherwise could
have wasted. Best part is that export of services result in export of
high value. There is almost no material exported which consume some
natural resource. Only thing exported is labor of Professionals, which
doesnt deplete, instead grows with time. Now India is better placed to
become a truly Knowledge Economy.
Exports of these services constitute big part of Indias foreign
Exchange earnings. In fact, the only three years India had Current
Account surplus, I.e. 2000-2002, was on back of this export only.

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Banking
Further, in banking too India has been a gainer. Since reforms, there
have been three rounds of License Grants for private banks. Private
Banks such as ICICI, HDFC, Yes Bank and also foreign banks, raised
standards of Indian Banking Industry. Now there is cut through
competition in the banking industry, and public sector banks are more
responsive to customers.
Here too IT is on path of bringing banking revolution. New government
schemes like Pradhan Mantri Jan dhan Yojana aims to achieve their
targets by using Adhaar Card. Having said this, Public Sector Banks still
remain major lender in the country.
Similarly Insurance Industry now offers variety of products such as Unit
Linked Insurance plans, Travel Insurance etc. But, in India life Insurance
business is still decisively in hands of Life Insurance Corporation of
India.
Stock Markets
Another major development is one of Stock Markets. Stock Markets are
platforms on which Corporate Securities can be traded real time. It
provides mechanisms for constant price discovery, options for
investors to exit from or enter into investment any time. These are
back bone of free markets these days and there is robust trade going
all over the world on stock exchanges. Their Importance can be
estimated from the fact that, behavior of stock markets of a country is
strongest indicator of health and future prospects of an economy.
These markets has thrown open wide array of associated services such
as Investment Banking, Asset Management, Underwriting services,
Hedging advice etc. These collectively employ lakhs of people all over
India.
Similarly there are commodities market which provides avenues for
investment and sale of various eligible commodities.
Telecom Sector
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Conventionally, Telecom sector was a government owned monopoly


and consequently service was quite substandard. After reforms, private
telecom sector reached pinnacle of success. And Indian telecom
companies went global. However, corruption and rent seeking marred
growth and outlook of this sector.
Entry of modern Direct to Home services saw improvements in
quality of Television services on one hand and loss of livelihood for
numerous local cable operators.
Education and Health Sector
It should be noted that food (Agriculture), Health and education (and to
lesser extent banking) are among basic necessities, which every
human being deserves and cant do without. Unfortunately, in
developing countries there is market failure in all these sectors and
majority of people cant afford beyond a certain limit (or cant afford at
all). Concept of free markets, globalization, liberalization etc. fails here
miserably. Free markets provide goods and services to people who can
afford paying for them, not to those who deserve and need these.
Now if we consider these sectors from angle of our inclination towards
free markets, certainly there has been lot of progress. There has been
world class education available in India and Deregulation has resulted
in Mushrooming of private engineering and Medical Colleges. But in
reality, this had far reaching devastating effect on society.
These new colleges accommodate only a miniscule proportion of
aspirants at very high costs. Recently, an Independent organization
Transparency International came out with report claiming that Indias
medical system is most corrupt in the world. This was no surprise, we
all know from where it starts. High fees of education forces many
aspirants to take educational loans from banks. After qualifying job
market is unable to absorb majority of them. Practice turns out to be
option of last resort. Now to make a decent living and to pay back the
loans person is lured by corruption. Consequently, when many similar
cases are put together, we get a corrupt system, economy and society.
Reality is that after deregulation and liberalization, government along
with other sectors, pulled its hand from social sectors too. Now there is
Mediocre to high quality options are available in private sector which
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can be availed as per ones budget. In public Sector Less than


Mediocre to Mediocre options are available. This leaves huge
proportion of aspiring students and expecting patients.
On Social front Indias performance is deplored all over the world and it
is probably behind all important developing economies. This lacuna has
been recognized and government has taken the charge. In case of
education almost universal enrollments has been achieved upto
primary level and now impetus should be on improving quality, so that
student of public schools comes at par with atleast average private
ones.

Savings, Investment and Fiscal Discipline


Fiscal profligacy was seen to have caused the balance of payments
crisis in 1991 and a reduction in the fiscal deficit was therefore an
urgent priority at the start of the reforms. The combined fiscal deficit of
the central and state governments was successfully reduced from 9.4
percent of GDP in 1990-91 to 7 percent in both 1991-92 and 1992-93
and the balance of payments crisis was over by 1993. However, the
reforms also had a medium term fiscal objective of improving public
savings so that essential public investment could be financed with a
smaller fiscal deficit to avoid crowding out private investment. This
part of the reform strategy was unfortunately never implemented.
There is also room to reduce central government subsidies, which are
known to be highly distortionary and poorly targeted (e.g. subsidies on
food and fertilizers), and to introduce rational user charges for services
such as passenger traffic on the railways, the postal system and
university education. Overstaffing was recently estimated at 30
percent and downsizing would help reduce expenditure.

Foreign Direct Investment


Liberalizing foreign direct investment was another important part of
Indias reforms, driven by the belief that this would increase the total
volume of investment in the economy, improve production technology,
and increase access to world markets. The policy now allows 100
percent foreign ownership in a large number of industries and majority
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ownership
in
all
telecommunications.

except

banks,

insurance

companies,

Infrastructure Development
Rapid growth in a globalized environment requires a well-functioning
infrastructure including especially electric power, road and rail
connectivity, telecommunications, air transport, and efficient ports.
India lags behind east and SE Asia in these areas. These services were
traditionally provided by public sector monopolies but since the
investment needed to expand capacity and improve quality could not
be mobilized by the public sector, these sectors were opened to private
investment, including foreign investment.
Civil aviation and ports are two other areas where reforms appear to be
succeeding, though much remains to be done. Indias road network is
extensive, but most of it is low quality and this is a major constraint for
interior locations. The major arterial routes have low capacity
(commonly just two lanes in most stretches) and also suffer from poor
maintenance.
The railways are a potentially important means of freight
transportation but this area is untouched by reforms as yet. The sector
suffers from severe financial constraints, partly due to a politically
determined fare structure in which freight rates have been set
excessively high to subsidize passenger fares, and partly because
government ownership has led to wasteful operating practices. Excess
staff is currently estimated at around 25 percent. Resources are
typically spread thinly to respond to political demands for new
passenger trains at the cost of investments that would strengthen the
capacity of the railways as a freight carrier.

Issues:
Regulation, public sector, corruption
India ranked 133rd on the Ease of Doing Business Index in 2010,
compared with 85th for Pakistan, 89th for People's Republic of China,
125th for Nigeria, 129th for Brazil, and 122nd for Indonesia.
Corruption in many forms has been one of the pervasive problems
affecting India. For decades, the red tape, bureaucracy and the Licence
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Raj that had strangled private enterprise. The economic reforms of


1991 cut some of the worst regulations that had been used in
corruption.
Corruption is still large. A 2005 study by Transparency International (TI)
India found that more than half of those surveyed had firsthand
experience of paying a bribe or peddling influence to get a job done in
a public office. The chief economic consequences of corruption are the
loss to the exchequer, an unhealthy climate for investment and an
increase in the cost of government-subsidised services. The TI India
study estimates the monetary value of petty corruption in 11 basic
services provided by the government, like education, healthcare,
judiciary, police, etc., to be around 211 billion (US$3.3 billion). India
still ranks in the bottom quartile of developing nations in terms of the
ease of doing business, and compared with China, the average time
taken to secure the clearances for a startup or to invoke bankruptcy is
much greater.
The Right to Information Act (2005) and equivalent acts in the states,
that require government officials to furnish information requested by
citizens or face punitive action, computerisation of services and
various central and state government acts that established vigilance
commissions have considerably reduced corruption or at least have
opened up avenues to redress grievances. The 2006 report by
Transparency International puts India at 70th place and states that
significant improvements were made by India in reducing corruption.
Employment
India's labour force is growing by 2.5% every year, but employment is
growing only at 2.3% a year. Official unemployment exceeds 9%.
Regulation and other obstacles have discouraged the emergence of
formal businesses and jobs. Almost 30% of workers are casual workers
who work only when they are able to get jobs and remain unpaid for
the rest of the time. Only 10% of the workforce is in regular
employment. India's labour regulations are heavy even by developing
country standards and analysts have urged the government to abolish
them.
From the overall stock of an estimated 458 million workers, 394 million
(86%) operate in the unorganised sector (of which 63% are self16

employed) mostly as informal workers. There is a strong relationship


between the quality of employment and social and poverty
characteristics. The relative growth of informal employment was more
rapid within the organised rather than the unorganised sector. This
informalisation is also related to the flexibilisation of employment in
the organised sector that is suggested by the increasing use of
contract labour by employers in order to benefit from more flexible
labour practices.
Children under 14 constitute 3.6% of the total labour force in the
country. Of these children, 9 out of every 10 work in their own rural
family settings. Around 85% of them are engaged in traditional
agricultural activities. Less than 9% work in manufacturing, services
and repairs. Child labour is a complex problem that is basically rooted
in poverty. The Indian government is implementing the world's largest
child labour elimination program, with primary education targeted for
~250 million.
Numerous
non-governmental
and
voluntary
organisations are also involved. Special investigation cells have been
set up in states to enforce existing laws banning employment of
children (under 14) in hazardous industries. The allocation of the
Government of India for the eradication of child labour was
US$10 million in 199596 and US$16 million in 199697. The allocation
for 2007 is US$21 million.

Environmental degradation
About 1.2 billion people in developing nations lack clean, safe water
because most household and industrial wastes are dumped directly
into rivers and lakes without treatment. This contributes to the rapid
increase in waterborne diseases in humans. Out of India's 3119 towns
and cities, just 209 have partial treatment facilities, and only 8 have
full wastewater treatment facilities (WHO 1992). 114 cities dump
untreated sewage and partially cremated bodies directly into the
Ganges River. Downstream, the untreated water is used for drinking,
bathing, and washing. This situation is typical of many rivers in India as
well as other developing countries. Globally, but especially in
developing nations like India where people cook with fuelwood and coal
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over open fires, about 4 billion humans suffer continuous exposure to


smoke. In India, particulate concentrations in houses are reported to
range from 8,300 to 15,000 g/m 3, greatly exceeding the 75 g/m 3
maximum standard for indoor particulate matter in the United States.
Changes in ecosystem biological diversity, evolution of parasites, and
invasion by exotic species all frequently result in disease outbreaks
such as cholera which emerged in 1992 in India. The frequency of
AIDS/HIV is increasing. In 1996, about 46,000 Indians out of 2.8 million
(1.6% of the population) tested were found to be infected with HIV.

Conclusions
The impact of gradualist economic reforms in India on the policy
environment presents a mixed picture. The industrial and trade policy
reforms have gone far, though they need to be supplemented by labor
market reforms which are a critical missing link. The logic of
liberalization also needs to be extended to agriculture, where
numerous restrictions remain in place. Reforms aimed at encouraging
private investment in infrastructure have worked in some areas but not
in others. Progress has been made in several areas of financial sector
reforms, though some of the critical issues relating to government
ownership of the banks remain to be addressed.
Critics often blame the delays in implementation and failure to act in
certain areas to the choice of gradualism as a strategy and it needs to
be seen when joins the elite league of the most developed nations.

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